Sounds like the OP's scenario is that he reads the serverFile.xml file, retrieves the property element with the "FileName" attribute, reads its "value" attribute (which contains the literal string "%FILE%"), and is then stuck because he has no way to remotely determine the value of %FILE% on the server machine.
It doesn't sound like there is any server-side program at all, it's just being accessed as a remote file system.
But if the remote file system can set the value of an environment variable to point to a specific file, then why can't that path simply be written to the XML file instead?
And as a comment, "FILE" seems like a particularly bad choice for an environment variable that forms a critical part of a processing system. "XYZ_APP_FILE" or something a bit more app-specific might be a better choice.
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